It was a third no-show in a row from Rupert Murdoch at News Corp’s latest quarterly profit briefing, this time for the three months to March in which the company reported a 47% jump in net profit and a sterling defence of his master by chief operating officer Chase Carey.
Since the UK phone-hacking and bribery scandals erupted last July in Britain, Murdoch has made himself scarce when it came to quarterly earnings briefings, which he used to dominate, with the help of other executives, such as finance boss David DeVoe and Carey.
“The select committee delivered hard truths most of which we openly acknowledge. However, I flatly reject the report’s notion that Rupert is unfit to run a major media company as unjustified in many people’s opinion, including my own. He’s one of the smartest, most forward-thinking executives of our time. The board and I rebuff any notion that he is unfit to run this company,” Carey said on the phone conference.
But Carey would have been expected to say something solidly in favour of Murdoch given the board statement of last week, to do otherwise would have been a sensational story. So in that respect the Carey testimonial was not big news.
What was big news though wasn’t so much the earnings surge from the company’s British cable business, or the $US31 million drop in revenues at the company’s newspapers in Australia or the US; the big news was a doubling in the share buyback to $US10 billion, a sign the company has given up trying to buy BSkyB in the UK (39%-owned) and a belief that the UK phone-hacking and bribery scandals will continue for months.
The original $US5 billion buyback was announced in July last year, just after the phone-hacking scandal exploded with the Milly Dowler allegations, and then the closure of the News of the World. So far 221.4 million shares have been bought back at at a cost of $US3.877 billion. It has helped boost the share price from a low last October of about $US13 to just over $US20 last night, aided by the recovery in US TV and cable advertising and other revenues, and the improved earnings outlook for the group, especially in the US.
There had been several reports in the past week of shareholder lobbying in favour of the buyback being increased by News to use up some of the $US10.68 billion in cash on its balance sheet at the end of March. That’s down $US2 billion since June 30 last year as the cost of the original buyback has mounted.
News reported a new $US63 million charge related to investigations stemming from the UK scandal, mostly due to fees to lawyers and other advisers rather than settlements with phone-hacking targets.
Third quarter net profit rose 47% from $US639 million to $US937 million. The figure included a $US111 million gain from participating in BSkyB’s share buyback and a $US27 million impairment and restructuring charge against its international newspaper operations. The location of that impairment wasn’t given in the report.
The driver was the company’s US cable network, where operating income rose 15% to $US846 million on greater profits at the company’s regional sports channels, along with FX and Fox News.
In comments in the phone briefing, DeVoe said warned that while profits for the full year would be higher, earnings in the current three months to the end of June (the fourth quarter) will fall as the company’s film division (Fox Studios) is expected to post a “significant decline” because of successful film releases in and around the same quarter of 2011. As well, the publishing segment would also be affected by soft advertising revenue at News Corp’s international newspapers.
“As a result of these factors we are expecting both our publishing and film segments to each be approximately $US125 million below last year’s fourth quarter result,” DeVoe said.